Here at diyhomebuyer.com, we are going to teach you exactly what a real estate agent do and think when they receive an offer on their listing, so you can save potentially thousands to tens of thousands of dollars in commissions when buying a home without a realtor.
In order to submit an offer on a home successfully, there are three things to consider.
First is to understand what does the seller want.
Second is what does the listing agent want.
Third is how much leverage you as a buyer have.
These are three topics that you have to understand, if you want to submit an offer on a home successfully without overpaying.
First, let’s go over what does the seller want.
Selling and buying a home is a stressfully event. Some people sell because they want a bigger place, some people sell because they want to downsize to smaller place. Others might sell because they lost their jobs and couldn’t afford the home anymore.
These are just some of the reasons why sellers are looking to sell their house. But there’s one thing that’s certain: sellers always want to sell their home for the most money possible, with the terms they are willing to accept.
Notice that the qualifying statement is with terms they are willing to accept.
Sometimes, the seller might accept an offer that’s lower than their list price due to other favorable terms, such as leaseback (allowing seller to rent the home back for a period of time after selling), or waiving a financing contingency, meaning it’s more likely for the deal to close.
After the seller review the entire offer, along with other offers if they have any, they then decide which offer to accept, or to counter.
Usually if a seller listed with a listing agent (real estate agent who listed the home), the listing agent will be the one presenting the offer(s) and help advise on which offer is better.
And presentation matters. The way the listing agent present the offers to their client will have impact on the seller’s decision.
That’s why it’s also important to understand what the listing agent wants.
Listing agents come in all shapes and sizes. Some are great at what they do and want the best for their clients, other not so much. So instead of focusing how they are different, we should focus on what they all want, and that is to have the deal close successfully.
Closing the deal means the listing agent can focus on other clients, it also means they get paid. To the listing agent, getting paid at 3% of $520,000 and getting paid 3% of $505,000, the difference is $450 in commission received. But to you, the buyer, the difference is $15,000 in the price of the home.
Let’s first understand how listing agent is compensated. This vary through different states, but usually what happens is the listing agent signs an exclusive listing agreement with the seller.
In most market they will ask for 5%-6% ask the commission. The entire commission is paid to the listing agent/brokerage (brokerage is the one who hires the agents. listings are usually signed between client and the agent’s brokerage).
Then the listing brokerage will split the commission with the buyer’s agent/brokerage. The brokerage and the agent will have their own split, but that’s besides the point in this guide.
As we mentioned, the listing agent will almost always recommend the offer that is the highest, and most likely to close. If you are familiar with the concept of expected value, this can be applied here.
So how do we prove to the listing agent that the deal will close? Let’s talk about it next.
If you are here, there is a good chance you want to know how to present an offer to the listing agent without a realtor, and save potentially thousands to tens of thousands in commission.
As a buyer, you might want many things in a home. But at this stage, you want one thing – to get your offer accepted, while paying the least amount of money possible.
If you want to negotiate successfully and get your offer accepted, here’s what you need to do.
Remember first you have to learn what that particular seller want. Call the seller if it’s a FSBO, or call the listing agent to see if you can gather some information about the seller.
If the seller is still living in the home, this might be good news. This means there are couple of things they want.
First thing might be they want a leaseback to have more time to move out, this is especially important if they are a big family.
The timing on this matters too. If it’s towards the end of March, schools usually finish at end of May, this means the leaseback becomes even more important if the home closes at the beginning of May.
Second thing may be that they value a quick close. They might want to quickly sell their home so they can buy their next home. Their offer on the next home might have a contingency that they can close only after selling this home.
In this case, they value an offer that has the highest likelihood of closing, while price takes a second priority.
It won’t be easy getting information like this, but this is part of the process of crafting an offer and negotiating. That’s why you have to build a good relationship with the agent, since they will be the one presenting the offer to the seller.
Finally you need to craft an offer that works for this home. Here’s the exactly steps to submit an offer successfully.
First you want to decide how much you want to offer. Using tools and guides available online, and here at diyhomebuyer.com/tools/, you can come up with the fair value of the home. But remember, every home is different, and every buyer is different. A pool that cost $30,000 to build, might worth $50,000 to someone who loves swimming in the backyard, or only worth $10,000 for someone who doesn’t swim at all and hate the maintenance.
Second, decide on the financing option. If the seller wants a buyer who can close on time, putting a larger downpayment amount and earnest money amount will show your seriousness and strength. Here’s a simple guide on financing preferences.
There are other things to help you build up leverage so when you are submitting an offer, you know you didn’t overpay, you didn’t lose your negotiation leverage, and the seller will still entertain your offer despite a lower offer.
Your goal here is to receive a counter-offer from the seller and start the negotiation process.
But to do all that, you first need to learn how to draft up a contract. Be sure to checkout our Home Offer Submission tool to help you navigate the process of drafting a home purchase offer without a realtor.
If you want to know the rest of the ways to build up leverage and how to negotiate when the seller sends a counter offer, read our next guide on how to negotiate on a home.
